Milk Prices Are About to Double As Congress Does Nothing

Originally published: December 28, 2012Updated: December 29, 2014 at 11:10 amBy Zachary Reis

There is no sense in crying over spilt milk. Why bewail what is done and cannot be recalled?” ~ Sophocles.

Moriches, N.Y. (MorichesDaily) — Don’t cry over spilled milk? If Congress doesn’t take action in the next four days, milk prices could shoot up..dramatically. Prices could double to about $7 a gallon..start crying.

But why?

The Dairy Product Price Support Program which is included in the farm bill is designed to help farmers by guaranteeing a minimum price for milk.

Basically, the government buys things made from milk — cheese, butter and dry milk. Since the government doesn’t want to have to actually store milk, as it can quickly go bad. Buy up enough of this stuff, and you drive up the price of milk.

It works like this: In order to keep dairy farmers in businesses, the government agrees to buy milk and other products if the price gets too low. The current agriculture bill has a formula that means the government steps in if the price of milk were to drop by roughly half from its current national average of about $3.65 a gallon.

The government hasn’t had to buy a significant amount of this stuff in the past decade because the price of milk has been high enough on its own.

Thanks to Congress’s failure to pass a new version of the farm bill, the last edition of which officially expired on September 30, American consumers are about to see the price of milk at the grocery store to skyrocket in the new year.

It might even double to around $6 or $7 a gallon. That is, unless our elected officials defy their recent track record and manage to legislate a fix before January 1, 2013.

So instead of leaving farmers entirely out in the cold, the law states that if a new bill isn’t passed or the current one extended, the formula for calculating the price the government pays for dairy products reverts back to a 1949 statute. Under that formula, the government would be forced to buy milk at twice today’s price – driving up the cost for everyone.

Washington Post Columnist Charles Krauthammer said, “I do think if we went over the milk cliff it would actually be a good idea. [If] people actually saw the milk price double, it would be less abstract than watching a debt clock. They would finally understand that we have the insane laws, that acquire barnacles over the decades. And the farm laws are the worst. They are all kind of pressure, special interest favors, pay offs which make no economic sense. I’d like to wipe them out and start all over again, and it would be good if the law expired. People would actually be awakened to how insane our system is and how much we really need tax reform. It wouldn’t be an abstraction, it would be real.”